Below is the March 26, 2024 edition of the Ukraine Business Roundup Weekly Newsletter.Subscribe to get the biggest business and technology news from Ukraine straight to your inbox here.
Over the past week, Russian attacks have targeted energy facilities across Ukraine, affecting nearly all major energy producers in the country and causing power outages for approximately 1.5 million people.
Ukrainian state-owned company Ukrhydroenergo says the Dnipro hydropower plant in Zaporizhzhya has been hit several times, destroying all units, and it could take 18 to 24 months to build it from scratch. he added.
Naftogaz Director Oleksiy Chernyshov said the company's underground gas storage facilities in western Ukraine require repairs to above-ground infrastructure, but gas stored deep underground was not affected by the attack. Foreign traders in 2023 rented 2.5 billion cubic meters of storage space last year and had only recently started injecting it.
The attacks on March 22 and 24 cost national power grid operator Ukrenergo between 90 million and 100 million euros ($97 million to $180 million), CEO Volodymyr said.・Mr. Kudlicki said on Facebook.
DTEK, Ukraine's largest private energy company, was also affected, losing half of its power generation capacity on March 22, but “unfortunately, we cannot recover quickly,” DTEK spokesman Pablo Bilodid said. , spoke to Kiev Independent reporter Martin Fornusek about a recent article on Russia's attacks on Russia. National energy system.
Why now, especially since Ukraine has just finished its heating season and the weather is getting warmer? Accounts range from retaliation for recent Ukrainian attacks on Russian oil refineries to the Kremlin taking advantage of Ukraine's dwindling ammunition supplies.
One thing is certain: If the attacks continue and the $60 billion in additional funding to Ukraine still tied up in the U.S. Congress doesn't arrive, the country will be largely unable to defend its skies, Fornusek said. writing. It doesn't just mean having a devastating impact on critical infrastructure. That always means more civilian deaths.
If you read this newsletter every week, you may remember that in last week's issue I questioned the validity of Ukraine's list of “international war sponsors.” There appeared to be many other similar lists, and the government abolished them last week.
Well, in a way. The Cabinet of Ministers announced on March 19 that the list would be removed from the National Anti-Corruption Agency website. Sources said Ukraine's National Security and Defense Council still has an updated list.
Following the start of a full-scale invasion, Ukraine has created an international war sponsor list to call on and pressure companies to withdraw from the Russian market. Approximately 50 multinational companies participated, including Nestlé, Philip Morris, Unilever, and PepsiCo.
People I spoke to said there were constant complaints among Ukraine's partners about who was on the list and who wasn't. Denis Mariuska from the Ministry of Justice said in early March that international partners were “very dissatisfied” with the list.
Ukraine's Ministry of Foreign Affairs was also told that the list was having a “negative impact” on “important decisions to counter Russian aggression.”
It also raised several questions about how companies were selected, with some questioning the integrity of the process.
Instead of disclosing the companies or individuals, the information will be forwarded to the Interdepartmental Working Group on the Implementation of National Sanctions Policy, which will decide whether further action is needed.
Frozen allies
Bloomberg reported on March 21 that the United States will issue $50 billion in bonds to the Group of Seven (G7) countries from profits generated from freezing Russian assets, with the proceeds to be used to support Ukraine. The company reportedly proposed the establishment of a special purpose vehicle (SPV). .
The SPV will leverage about $280 billion of Russian central bank assets tied up in G7 countries and Europe, and the proceeds will back bonds called “freedom bonds,” sources told Bloomberg on condition of anonymity. It is said that
Reuters reported on March 22 that an unnamed diplomat told Reuters that the United States was pushing the plan specifically to make up for delays in Congress over U.S. aid, but France , Germany and some other EU countries are reportedly opposed. .
Since the beginning of the full-scale invasion, Western countries have locked up about $300 billion in assets in Russia's central bank.
According to Bloomberg, Russia's frozen assets in the EU generate a net profit of about $3.6 billion a year, and the proceeds from the SPV are equivalent to $60 billion in U.S. aid stuck in Congress.
Lifelines
Prime Minister Denis Shmyhal announced on March 26 that Ukraine had received $880 million from the International Monetary Fund (IMF).
The IMF announced on March 21 that it had approved a third review of Ukraine's $15.6 billion loan program, allowing the release of $880 million earmarked for budgetary support. This distribution is the third tranche of the Extended Fund Facility (EFF), bringing total distributions to date to $5.4 billion.
“The funds will help cover priority budget expenditures and maintain macro-fiscal stability,” Schmihal said.
Gavin Gray, head of the mission to Ukraine, said on March 22 that Ukraine has maintained a strong performance in the IMF program throughout its first year, meeting all but one of the quantitative performance criteria related to tax revenue. Ta. Gray also said the IMF expects the Ukraine war to end in 2024.
IMF Managing Director Kristalina Georgieva stressed that Ukraine maintains macroeconomic and financial stability despite the “significant social and economic costs” of full-scale Russian aggression.
But he also said that “given the very high risks to the outlook, primarily due to the extremely high uncertainties associated with the war and potential delays in external financing,” the economic recovery in 2024 is likely to be between 3% and 4%. It warned that the economy is expected to slow down slightly.
“Authorities should be wary of these risks,” he said in a statement, “and safeguarding Ukraine's hard-won macroeconomic stability will require that external financing committed to Ukraine by all donors be ensured in a timely and timely manner.” It's also important that it's spent in a predictable way.”
Reviving real estate
One of Kiev's iconic Soviet-era buildings is the latest architectural monument in danger of being gobbled up by developers looking for the next real estate opportunity.
The brutal Soviet-era Zhitny Market in central Kiev's Pozyr district was put up for auction last week after a suspiciously short bidding period of just five days, sparking a backlash among activists.
Celebrity chef Evhen Kropotenko led an online protest against the auction, saying its short deadline meant the winner was predetermined, an unusual feature of Ukraine's opaque bidding system. He said it was not.
In response to the public uproar, the city canceled the five-day auction and rescheduled it for April 15 to allow more bidders to participate.
But Mr Kropotenko warned that the fight was not over, highlighting on social media the example of Kyiv's Shinni market, which was destroyed despite protests in 2005. On March 25, he said on Facebook that he is currently working with lawyers to prepare the necessary documents and possible partners for the auction so that Zhitny ends up in the right hands.
“I consider Zhitny a gastronomic and cultural center. I want foreigners who come to Madrid's San Miguel market to come here, too,” Kropotenko said.
Click here for the full article by business reporter Dominic Culverwell.
What else is happening
McDonald's plans to open at least six new restaurants in Ukraine this year. McDonald's Managing Director for Ukraine, Czech Republic and Slovakia Yulia Badridinova said at a press conference that McDonald's will open six new stores in Ukraine's Zakarpattia and Chernivtsi Oblasts and the suburbs of Kiev in 2024, bringing the total number of stores in the country to 1,500. He said he hopes to create new jobs for people. Badritdinova said it was difficult to say exactly when the new stores would open, as war-related issues caused complications and could push the opening of some stores into 2025. Last year, McDonald's opened 10 new stores, increasing the number of operations at all stores. The number of restaurants has increased to 101 (the company has a total of 117 restaurants in Ukraine, 16 of which are closed due to the Russian war). Badridinova also said that since reopening in September 2022 after being closed for seven months since the start of the invasion, the company has recovered operations to 70% of pre-war levels.
The chairman of the Antimonopoly Commission conducted an investigation on suspicion of unjust enrichment. Radio Free Europe/Radio Liberty (RFE/RL) reported that Antimonopoly Committee Chairman Pavlo Kirilenko has been arrested by Ukraine's National Anti-Corruption Bureau (NABU) and the Special Prosecutor's Office for Corruption on suspicion of illegal enrichment. (SAPO) is currently investigating. On March 25, he cited a statement from the anti-corruption agency. The case was reportedly launched on March 22 following a media investigation by Schemes, an RFE/RL investigative project, which found that Kirilenko's family will receive 70 million yen between 2020 and 2023. He reportedly bought real estate and cars worth more than Hr ($1.8 million). The family bought this land thanks to the start-up capital that his wife's grandmother had saved in the 1990s by selling shares in a polystyrene factory in Horlivka and received as an employee.
Polish Minister: Negotiations on the licensing system for Ukrainian products could end this week. Polish Minister of Economic Development and Technology Krzysztof Hedman said negotiations on creating a permit system for trade in Ukrainian products are progressing and could be completed as early as this week, Radio Lublin, published on March 25. I mentioned it in the comments. Bargain especially on grains, rapeseed, corn, sugar, poultry, eggs, soft fruits, and apples. Hetman pointed out that farmers' demands regarding the Green Deal have already been met. The minister said that due to the surplus of wheat and corn, the Polish government also plans to allocate subsidies for grain sales. “Also, regarding grains, we would like to emphasize that we hope that even the transit, mainly corn and wheat, will expire on April 1, because this is what we have discussed with the Ukrainian side,” Hetman said. Stated.
Bloomberg: Russia's oil trade feels pressure from Western sanctions against India. Russia's oil trade is starting to feel the pressure of Western sanctions, Bloomberg reported on March 23, as Indian refineries no longer accept tankers from Moscow's state shipping company Sovcomflot. Tankers carrying Russian crude oil have been unable to land at Indian ports in recent months in connection with sanctions. According to Bloomberg, dozens of sanctioned ships are currently anchored in numbers not seen since 2017. Sovcomflot transported about one-fifth of the crude oil shipped from Russia to India in 2023.
The Guardian: Ukraine says it can produce 2 million drones a year with financial support from Western countries. Minister of Digital Transformation Mykhailo Federov said in an interview with the Guardian published on March 20 that with additional support from Western governments and the civilian population, Ukraine will double its drone production rate to 2 million drones per year. He said it was possible. President Volodymyr Zelenskiy announced last December that Ukraine was achieving that goal. Fedorov said that due to a lack of external funding, Ukraine was “contracting far below the capabilities of our manufacturers,” and called on the country's partners to provide more funding. According to Federov, more than 200 Ukrainian companies active in the drone field are locally based and self-sufficient in the assembly of drones, but components always have to be sourced from abroad. The main problem facing companies is financial support, Fedorov said.
